sardia wrote:For example, the stereotype of the homeowners blocking a high rise from being built or increasingly the cost of red tape. The homeowners get higher home values while prospective buyers get priced out.

Or the other example: the developer that muscles his way into a community of single-family homes and builds a high-rise? Where the property values go down, and the developer gets the benefit of the devaluation by selling (or renting) a lot of apartments?

Jose

Order of the Sillies, Honoris Causam - bestowed by charlie_grumbles on NP 859 * OTTscar winner: Wordsmith - bestowed by yappobiscuts and the OTT on NP 1832 * Ecclesiastical Calendar of the Order of the Holy Contradiction * Please help addams if you can. She needs all of us.

sardia wrote:For example, the stereotype of the homeowners blocking a high rise from being built or increasingly the cost of red tape. The homeowners get higher home values while prospective buyers get priced out.

Or the other example: the developer that muscles his way into a community of single-family homes and builds a high-rise? Where the property values go down, and the developer gets the benefit of the devaluation by selling (or renting) a lot of apartments?

Jose

When the supply of homes rises, the demand (value) for homes does go down, all else equal. Both cases illustrate the gray area of property rights. Saying your property rights ends at the property line is all nice and dandy until you see development happening.

Isn't the estate tax a form of wealth taxation? Not that it's very effective, but still, it's very illustrative of the perils of wealth taxation.

sardia wrote:When the supply of homes rises, the demand (value) for homes does go down, all else equal.

But all else is most definitely not equal in these scenarios. It's not builders building more of the same, it's builders changing the character of the neighborhood. It is that, not supply/demand, that lowers property values. To illustrate, if you build nicer homes in an area, the whole area goes up in value despite the increased supply.

sardia wrote:Isn't the estate tax a form of wealth taxation? Not that it's very effective, but still, it's very illustrative of the perils of wealth taxation.

AIUI, it's kind of (problematic) counter to the stepped-up basis that also occurs upon death. Also, it's more of a (hefty) transaction tax than a wealth tax.

Jose

Order of the Sillies, Honoris Causam - bestowed by charlie_grumbles on NP 859 * OTTscar winner: Wordsmith - bestowed by yappobiscuts and the OTT on NP 1832 * Ecclesiastical Calendar of the Order of the Holy Contradiction * Please help addams if you can. She needs all of us.

sardia wrote:For example, the stereotype of the homeowners blocking a high rise from being built or increasingly the cost of red tape. The homeowners get higher home values while prospective buyers get priced out.

Or the other example: the developer that muscles his way into a community of single-family homes and builds a high-rise? Where the property values go down, and the developer gets the benefit of the devaluation by selling (or renting) a lot of apartments?

Jose

When the supply of homes rises, the demand (value) for homes does go down, all else equal. Both cases illustrate the gray area of property rights. Saying your property rights ends at the property line is all nice and dandy until you see development happening.

Isn't the estate tax a form of wealth taxation? Not that it's very effective, but still, it's very illustrative of the perils of wealth taxation.

The PRICE goes down. The demand curve doesn't shift, at least not in the short term. In the long term, well, if people get used to large living spaces the demand curve shifts up, not to mention that the size of the home seems to have some impact on birth rates which definitely affect demand.

As for the estate tax, I'm kinda meh on the whole thing. Rich people avoid most of it by making the grandkids the heirs (so it isn't taxed a second time when the kid dies) and other tricks, and the really wealthy offshore it or hide it entirely, so sadly it's not doing its job as an equalizer. Personally I think the estate tax (and capital gains) should be rolled into the income tax, possibly with the ability to spread it over say 5 years, e.g., you inherit $100k, counts as $20k income each year.

But the point of property tax isn't "well you have property so fuck you, pay up you rich bastard" but "your property needs to be protected by the police and fire departments, it's made more valuable by roads and schools, so you should pay your fair share".

sardia wrote:Property rights gets since the people who currently live there set the rules for people who work there. For example, the stereotype of the homeowners blocking a high rise from being built or increasingly the cost of red tape. The homeowners get higher home values while prospective buyers get priced out.

There's a further inequality of property taxes. Apparently richer folks can hire lawyers to appeal home appraisals, while poorer people generally can't. The end result is poor people subsidizing richer people's property taxes. http://www.chicagotribune.com/news/watc ... story.html

That makes sense. Laws, no matter how equal, are more easily leveraged by the folks with lawyers. Harder to get over that one time hump, so you end up paying more in the long run. So, all things considered, I think I'd prefer no property taxes at all. Sure, we're gonna end up paying those taxes some other way, but

I'm actually fairly okay with the gas tax. It may not be *perfect*, but if you want some kind of correlation between use and payment, with a side order of emphasizing efficiency, it's reasonably good. Seems more elegant than many systems, in that you get pretty decent outcomes for a low complexity cost.

Welcome back to you forums. I thought you had moved to greener forums.

Thanks! Just sort of took a hiatus post-election for a bit, spent less time talking politics in general.

ucim wrote:

sardia wrote:When the supply of homes rises, the demand (value) for homes does go down, all else equal.

But all else is most definitely not equal in these scenarios. It's not builders building more of the same, it's builders changing the character of the neighborhood. It is that, not supply/demand, that lowers property values. To illustrate, if you build nicer homes in an area, the whole area goes up in value despite the increased supply.

Sort of. That said, folks don't merely want to maintain the character of their neighborhood, they often want to actually improve values. It can lead to attempting to force out folks who don't "fit", ie, have less pretty homes, less classy businesses, etc.

Ultimately, what happens is that nobody wants to have the low-income housing anywhere near them. Doesn't much matter what the history of the area was.

And in practice, we have a significant need for low-income housing. Not everyone can *actually* live like they are upper crust, and own an expensive home. That's just unrealistic. So, they've got to have affordable housing *somewhere*.

So, I think there needs to be some limit on NIMBYism in practice. There's got to be some line between "they put in a factory next to me that pollutes ridiculously" and "they built a house much smaller than mine". The former is a reasonable exercise of property rights, and the latter seems to be excessive. More infringing on the rights of others to property than defending your own, yknow?

I've always felt that this "how it affects your property values" thing was a huge overreach of (and perversely, infringement upon) the concept of property rights. If Bob letting his yard look ugly "harms" his neighbor Alice, then can Bob plant an unusually beautiful garden in his own yard (without consulting the neighbors if they want it) and then charge Alice for the "improvement" to her property?

Pollution is one thing. If something from your property is getting onto mine, including into the air around it, that's just trespass. You're actually doing something to me property. But if you do something to your property and the only effect it has on my property is that other people's evaluation of my property's worth changes, you haven't actually done anything to me. That's the kind of mentality by which MAFIAA companies claim unrealized potential sales as "losses" to piracy.

roflwaffle wrote:but I support unifying/simplifying the tax rates for capital gains and earned income.

Why? Things should be as simple as possible, but no simpler. Capital gains are (mistakenly) seen as free money, as opposed to earned income. But it's not ~ capital gains come with risk - sometimes risk of total and complete loss of all the money that was =earned= in order to buy the stock that was hoped to generate some capital gains but things went south. It's not clear at all that they should be taxed the same.

Jose

Losses are possible, but those losses can be used to reduce future earned income and capital gains, which IMO is a reasonable incentive to compensate someone for that risk. It's also easier than ever to find low cost indexed investments, which minimize the chances of losing everything and maximize someone'a ability to capture the market's average return.

In general, my feeling is that any combination of tax policies and benefit programs that increase negative reallocation will increase income inequality and negatively affect the economy.

roflwaffle wrote:Losses are possible, but those losses can be used to reduce future earned income and capital gains,

Losses are not only possible, they are common, and sometimes quite large. But in any case, lost money is completely gone. Distinguish between loss of the capital and the tax consequences of having this loss. A "tax loss" is not free money.

And in the US, the losses can only be put against income $3000/year. If you have a $300,000 loss (which is not at all unusual for venture capitalists, who are the ones that allow significant sized businesses to begin in the first place), it would take 100 years of ordinary income to be able to make this up. Sure, you could put it against another capital gain, but if the loss is big enough (compared to your capital), you may not have another capital gain.

This is a real risk. It's the cost of aiming high. So those that aim high and reach it deserve their reward as much as anybody else does.

BTW, in New Jersey, if you have a capital gain and a capital loss in the same year, and they cancel out leaving you even (net zero), you pay tax on the gain and you do not get a deduction for the loss. It's quite punitive.

Sure, but "low cost indexed investments" don't drive the economy forward, and are highly unlikely to provide a big gain for the investor. In any case, stock picking advise is off topic here; the point is that people pick their investments and need to be fairly compensated for the risks they take. Money from investment isn't undeserved. I'll also add that, especially with long term investments, a lot of the return is often just inflation anyway.

Jose

Order of the Sillies, Honoris Causam - bestowed by charlie_grumbles on NP 859 * OTTscar winner: Wordsmith - bestowed by yappobiscuts and the OTT on NP 1832 * Ecclesiastical Calendar of the Order of the Holy Contradiction * Please help addams if you can. She needs all of us.

The easiest way to tax wealth is by printing money. The government gets more money, and the increase in the money supply causes inflation so everyone else's money is worth a little less. Voila, effectively a tax.

Well combined with a capital gains tax it does tax wealth ... eventually. Say you buy a house for $10k and it maintains the same inflation adjusted value. After some time you sell it for $20k, which is the present value of the $10k when you bought it. But even though you've gained no real value, you still have pay capital gains tax on the $10k increase. (Modulo exceptions for principle residences in the US, etc.)

If you want people to pay taxes every year you'd need a continuous capital gains tax, which is much trickier, since you'd have to do yearly assessments.

Of course most houses already have their own "wealth tax" - a property tax.

CorruptUser wrote:Or their wealth is tied up in stock, which if you aren't selling but rather living off of dividends you are basically immune to inflation insofar as it doesn't harm the company.

Dividends are taxed.

You are missing the point. Assuming they are taxed at the same rate, inflation doesn't do a meaningful thing to them. If the price of everything doubles, they collect twice as much dividend and end up with twice as much after-tax income. So how in any meaningful sense did your little money-printing scheme result in a tax on them? All you've done is devalue savings (and loans), ignoring the part where massive inflation wrecks the economy, so all you've managed to do is hurt only the people that have most of their wealth tied up in money, i.e., everyone below the upper-middle class.

CorruptUser wrote:Or their wealth is tied up in stock, which if you aren't selling but rather living off of dividends you are basically immune to inflation insofar as it doesn't harm the company.

Dividends are taxed.

You are missing the point. Assuming they are taxed at the same rate, inflation doesn't do a meaningful thing to them. If the price of everything doubles, they collect twice as much dividend and end up with twice as much after-tax income. So how in any meaningful sense did your little money-printing scheme result in a tax on them? All you've done is devalue savings (and loans), ignoring the part where massive inflation wrecks the economy, so all you've managed to do is hurt only the people that have most of their wealth tied up in money, i.e., everyone below the upper-middle class.

All money is devalued by inflation, and pretty much any business tends to have some operating capital around. Significant inflation eats into that pretty rapidly.

Now, not every industry needs or wants the same amount of money on hand, but some do have a fair bit, and you start getting some odd after-effects, like debt becoming much more popular/expensive. This can create bubbles(if loans remain easily available), or result in loan costs climbing rapidly, and companies dependent on loans for operating capital or expansions may be in a tight space.

On the whole, rich people generally tend to own a great deal more stock, and own more companies in general, so, strictly speaking, they are going to be hurt more by this. However, this sort of thing helps poor people in the same way that lopping off the feet of the tall helps short people. Yes, just printing lots of money is, from a certain perspective, very easy, but it's a bad substitute for proper fiscal policy, and can be disastrous if taken to extremes. Yeah, it *is* like a tax in that value is transferred, but not all taxes are equally desirable in terms of side effects, and large amounts of inflation can be quite costly indeed.

Pfhorrest wrote:I've always felt that this "how it affects your property values" thing was a huge overreach of (and perversely, infringement upon) the concept of property rights. If Bob letting his yard look ugly "harms" his neighbor Alice, then can Bob plant an unusually beautiful garden in his own yard (without consulting the neighbors if they want it) and then charge Alice for the "improvement" to her property?

Exactly! There's an inconsistency there, which most seem entirely happy to overlook. Pollution, sure, I agree. That's actual damages. Painting my house pink, even if pink is unpopular in the neighborhood, is not actually damaging your house. Your house remains the same.

It sadly doesn't stop there. Folk building homes along the approach to an airport, and then complaining of noise from aircraft is ridiculously commonplace. This goes beyond being upset at changes, and ventures into demanding improvements. Always to be paid for by others, of course.

Well combined with a capital gains tax it does tax wealth ... eventually.

Capial Gains taxes are a deferred income tax, not a wealth tax.

A wealth tax is a tax on your store of wealth. They are a tax on the integral of wealth over time.

Capital Gains taxes tax a *gain*. They tax a *change* in wealth. What more, the are a tax on the change in wealth *at the point the gain is realized*, which has significant advantages over a continuous income tax.

Say you buy a house for $10k and it maintains the same inflation adjusted value. After some time you sell it for $20k, which is the present value of the $10k when you bought it. But even though you've gained no real value, you still have pay capital gains tax on the $10k increase. (Modulo exceptions for principle residences in the US, etc.)

Ok, there is something. Let's do math.

There is 5% inflation per year. This corresponds to a 5% wealth tax on cash.

So you start with 10,000$ and do nothing with it. After 20 years it is worth 3500$ roughly.

They instead buy a house and do nothing with it. After 20 years it has a nominal value of 28000$ roughly.

In order to have an asset worth 3500$ at this point, you need ... 100% capital gains tax.

If you want people to pay taxes every year you'd need a continuous capital gains tax, which is much trickier, since you'd have to do yearly assessments.

So, you can get self assessments that are reasonably accurate by forcing people to *accept buyouts at their self-assessed value*, or some multiple.

Ie, imagine if you are mandated to accept a bid of 50% greater than you self-assessed the property for. Someone puts that offer up, they get to own the property. Once the bid is up, you are liable for any damage you do to your own property.

Of course most houses already have their own "wealth tax" - a property tax.

*nod*.

One of the painful things about our time is that those who feel certainty are stupid, and those with any imagination and understanding are filled with doubt and indecision - BR

So I have $1000 and three firkins which I got for a dime apiece. A 10% wealth tax takes $100 from me.

Now I have $900 and three firkins, which became hugely sought after. People have offered me $3000 each for them, but I don't sell. The 10% wealth tax costs me $990. I have to borrow $90 to pay my taxes.

Now I have three firkins and owe $90. Nobody wants firkins this year. The 10% wealth tax (cleverly designed to go both ways) gives me $9, for which I am eternally grateful. But I can't pay the $81 I owe, and go to debtor's prison.

Why should firkins that I did nothing with be my ruin?

Jose

Order of the Sillies, Honoris Causam - bestowed by charlie_grumbles on NP 859 * OTTscar winner: Wordsmith - bestowed by yappobiscuts and the OTT on NP 1832 * Ecclesiastical Calendar of the Order of the Holy Contradiction * Please help addams if you can. She needs all of us.

ucim wrote:So I have $1000 and three firkins which I got for a dime apiece. A 10% wealth tax takes $100 from me.

Now I have $900 and three firkins, which became hugely sought after. People have offered me $3000 each for them, but I don't sell. The 10% wealth tax costs me $990. I have to borrow $90 to pay my taxes.

Now I have three firkins and owe $90. Nobody wants firkins this year. The 10% wealth tax (cleverly designed to go both ways) gives me $9, for which I am eternally grateful. But I can't pay the $81 I owe, and go to debtor's prison.

Why should firkins that I did nothing with be my ruin?

Jose

Is this your complaint of property taxes and IPO stocks? Because that happens all the time in a volatile market.

sardia wrote:Is this your complaint of property taxes and IPO stocks? Because that happens all the time in a volatile market.

As far as I know, real estate is not that volitile (property taxes are based on an assessment that is done every some-odd years, and the valuation can be contested), and IPO stocks are not taxed that way. You have to realize the gain (typically by selling the stock; trickier if options are involved) before you are taxed, which means you have the money to pay, and you don't have the stock (when it goes back down).

Instead, it's just a comment on how wealth taxation (rather than income taxation) would work in a volatile stock market.

I suppose the government could assess taxes in kind, but that gets messy fast.

Jose

Order of the Sillies, Honoris Causam - bestowed by charlie_grumbles on NP 859 * OTTscar winner: Wordsmith - bestowed by yappobiscuts and the OTT on NP 1832 * Ecclesiastical Calendar of the Order of the Holy Contradiction * Please help addams if you can. She needs all of us.

Stuff rising and falling 30,000x in value in a single year is going to cause problems whatever the system. Bitcoin peaked at 'only' a 20x rise in value this year in comparison and will still have made some people millionaires and others bankrupt.

In your scenario, a hedging/futures/insurance market would most likely step up: On a 30,000x increase in value people should hedge against market corrections in order to cover any wealth tax liabilities (and it would also be helpful if government assessed/issued tax bills more frequently than once a year for ultra-volatile, high-value assets.)

elasto wrote:Stuff rising and falling 30,000x in value in a single year is going to cause problems whatever the system.

I picked that number ("a dime apiece") to make the math easier; my point would be equally valid if the firkins cost me $100 each. And my point wasn't that this makes "some people millionaires and others bankrupt", but that a wealth tax unfairly taxes intangible volatile wealth by forcing a conversion where it is not appropriate (how much is the MGM logo worth this afternoon?). Having the government accept the intangible asset in payment fixes that, at an even bigger cost (how does MGM remit 10% of the MGM logo to the government?)

Another thought is that taxes are based on money, but money is only part of the equation: money buys influence, and it is arguably that influence that defines what wealth is, and what distinguishes between being broke and being poor. Influence should be taxed too, but there's no mechanism I can think of to do that.

Jose

Order of the Sillies, Honoris Causam - bestowed by charlie_grumbles on NP 859 * OTTscar winner: Wordsmith - bestowed by yappobiscuts and the OTT on NP 1832 * Ecclesiastical Calendar of the Order of the Holy Contradiction * Please help addams if you can. She needs all of us.

One note on property tax is that people are getting utility out of a property not just holding it and property taxes, when done right, are paying for things that service the property. In a lot of ways they are more a part of the expense of maintaining the asset than they are a tax for being wealthy enough to own the asset. This is fundamentally different from taxing "firkins".

Spoiler:

There are major issues with property tax funding though. They are pretty much always regressive and, since poor areas generate less revenue and as a result receive worse services, they can trap areas in poverty. This is an especially bad way to fund education.

You could go with a Georgist tax. Require reporting of rental income (or profits, if it's a business) for people who earn income on that property, and then use that to assess a value for all properties (or businesses) and require that tax be paid based on the potential rental value of your property were you to rent your property/license your IP to the highest bidder.

Thesh wrote:and require that tax be paid based on the potential rental value of your property

That would be horrible. It would encourage more development, punishing those who keep their land as nature intended, and that's the last thing our environment needs. Sitting on land is a Good Thing.

Jose

Order of the Sillies, Honoris Causam - bestowed by charlie_grumbles on NP 859 * OTTscar winner: Wordsmith - bestowed by yappobiscuts and the OTT on NP 1832 * Ecclesiastical Calendar of the Order of the Holy Contradiction * Please help addams if you can. She needs all of us.

Thesh wrote:You could go with a Georgist tax. Require reporting of rental income (or profits, if it's a business) for people who earn income on that property, and then use that to assess a value for all properties (or businesses) and require that tax be paid based on the potential rental value of your property were you to rent your property/license your IP to the highest bidder.

You can assess anything with a big enough market to have like sales/leases/licensing and it really isn't that difficult. Real property can get tricky because there are location aspects that can make finding like property sales very difficult but there are various well established methodologies for mass property value estimation. As for using business profits, have a look at how difficult it is to pin down corporate revenues to specific taxing jurisdictions and think about how hard it is going to be to get it attached to specific buildingsI'm not sure how you think they could determine what the potential revenue is of any given IP unless it was currently being licensed to someone.

ucim wrote:That would be horrible. It would encourage more development, punishing those who keep their land as nature intended, and that's the last thing our environment needs. Sitting on land is a Good Thing.

Most empty lots aren't generating revenue. If you were to do it just based on the current revenue generating capability, undeveloped land wouldn't be more than a parking lot. If the argument is to assess it based on the best thing that could be built on it, that would be awful but it would also be awful for a lot of developed property.Sitting on land can be good or bad depending on the situation. It doesn't necessarily reduce the total amount of development and can force more sprawl.

Minor note per the earlier discussion that there are times when inflationary policy makes sense. For example, if you have a massive savings glut that's restricting investment/economic activity. The post recovery stages of the aftermath of a bubble bursting maybe, or for a concrete example Japan in the 90s(I think? I definitely recall reading about inflationary policy being recommended for Japan in the 90s-00s).

As for LVT, I was taking to an economist friend of mine who said it might've made sense 100 years ago but wouldn't make sense now because so little wealth is tied up in land compared to investments and capital markets. The one place it might make sense is a few large cities with incredibly high land rents. NY and SF really.

ucim wrote:That would be horrible. It would encourage more development, punishing those who keep their land as nature intended, and that's the last thing our environment needs. Sitting on land is a Good Thing.

Most empty lots aren't generating revenue. If you were to do it just based on the current revenue generating capability, undeveloped land wouldn't be more than a parking lot. If the argument is to assess it based on the best thing that could be built on it, that would be awful but it would also be awful for a lot of developed property.Sitting on land can be good or bad depending on the situation. It doesn't necessarily reduce the total amount of development and can force more sprawl.

I'm not sure it's reasonable to expect every plot of land to be utilized at maximum efficiency.

Consider the case of a homeowner who is attached to where they live, but the area has urbanized. As they are elderly, they do not wish to move somewhere new, but rather, continue to live in their home.

Is it right to force them out by raising their taxes to an obscene amount?

What about lower income areas. If they don't have the money to build the fanciest possible thing that could be on the lot, should we tax them the same as people who can afford the nicest living arrangements?

Yeah that's largely why I oppose wealth taxation per se, especially property tax. What I'm aiming for in life, and what I think everyone deserves and we should be aiming to make available to everyone, is a situation where I don't have to pay to continue just being like I am now. I only have to pay if I want more, or if I'm using something up. So to put it in simplified practical terms, if I want to sit in my home and slowly starve to death, that won't cost me anything (except my own self-imposed suffering). If I want to eat, I have to pay for food of course; and if I want new things to have in my house, I have to pay for them too. But I shouldn't have to pay just to continue existing inside my own home. That's why I'm opposed to rent. Property taxes achieve the same effect, so I'm opposed to them as well.

But people using their ownership of wealth to leverage income from people who lack such wealth? Tax the shit out of that (and give the proceeds to the people being taken advantage of).

ucim wrote:So I have $1000 and three firkins which I got for a dime apiece. A 10% wealth tax takes $100 from me.

Now I have $900 and three firkins, which became hugely sought after. People have offered me $3000 each for them, but I don't sell. The 10% wealth tax costs me $990. I have to borrow $90 to pay my taxes.

Now I have three firkins and owe $90. Nobody wants firkins this year. The 10% wealth tax (cleverly designed to go both ways) gives me $9, for which I am eternally grateful. But I can't pay the $81 I owe, and go to debtor's prison.

Why should firkins that I did nothing with be my ruin?

You valued holding onto them more than you did your cash.

And the market gave a strong signal that those firkins could have high use to someone; if you are doing nothing useful with them, you are costing the economy the use of a high-value asset (even if it is only a reward).

Why should firkins be different than dollar bills wealth-wise?

Second, note that a 10% wealth tax is a high wealth tax. High rates distort the situation.

Tyndmyr wrote:I'm not sure it's reasonable to expect every plot of land to be utilized at maximum efficiency.

That is why I said, "that would be awful but it would also be awful for a lot of developed property". My point was that unless you did something like that, it won't keep people who want to from holding large chunks of vacant land in its natural state.

Yakk wrote:And the market gave a strong signal that those firkins could have high use to someone; if you are doing nothing useful with them, you are costing the economy the use of a high-value asset (even if it is only a reward).

Sometimes consuming goods right away isn't what is best for the economy.

Yakk wrote:...those firkins could have high use to someone; if you are doing nothing useful with them, you are costing the economy...

I don't see why I have an obligation to "not cost the economy". The economy is an abstraction; the firkins are real. The same can be said of money in the bank - it's not doing anybody any good... but when I have a rainy day, the only way I'll have money is if I had it in the bank. This is a real value - a real benefit.

Yakk wrote:Why should firkins be different than dollar bills wealth-wise?

Because I can't pay my taxes in firkins. And even if I could, the accounting would be a nightmare. Change firkins to pigs to see what I mean.

Interesting, but it seems to value the firkins as if they were always worth the sale price, which seems quite unfair. Suppose they soared in value only in the last year; it becomes important that I did (or didn't) sell them and re-buy them the year before.

Jose

Order of the Sillies, Honoris Causam - bestowed by charlie_grumbles on NP 859 * OTTscar winner: Wordsmith - bestowed by yappobiscuts and the OTT on NP 1832 * Ecclesiastical Calendar of the Order of the Holy Contradiction * Please help addams if you can. She needs all of us.

Why do you feel the money in your bank is real? Why do you feel the money in your wallet is in any way "real"? Presumably your firkins have some sort of inherent value (or pigs). A dollar is worthless unless we all agree to pretend it can buy things.

No, the point was that accounting for taxes actually paid in firkins and pigs as well as dollars gets messy. A hundred million people sending fractions of a pig to Washington.... really... one pig is enough!

Jose

Order of the Sillies, Honoris Causam - bestowed by charlie_grumbles on NP 859 * OTTscar winner: Wordsmith - bestowed by yappobiscuts and the OTT on NP 1832 * Ecclesiastical Calendar of the Order of the Holy Contradiction * Please help addams if you can. She needs all of us.

I agree there's a difference, but dollar bills and the number that appears in your bank account are equally imaginary. And if the day is particularly rainy (your bank crashed), it's very possible you won't have access to your money, and then the people with the firkins are the ones who'll be able to exchange them for actual goods, not your dirty piece of paper.

Yes, you're right, but that's not the point I was making (and by design, analogies must be inaccurate somewhere). I was comparing (my) dollar bills with (the) economy-as-a-thing.

Jose

Order of the Sillies, Honoris Causam - bestowed by charlie_grumbles on NP 859 * OTTscar winner: Wordsmith - bestowed by yappobiscuts and the OTT on NP 1832 * Ecclesiastical Calendar of the Order of the Holy Contradiction * Please help addams if you can. She needs all of us.

Yakk wrote:...those firkins could have high use to someone; if you are doing nothing useful with them, you are costing the economy...

I don't see why I have an obligation to "not cost the economy". The economy is an abstraction; the firkins are real. The same can be said of money in the bank - it's not doing anybody any good... but when I have a rainy day, the only way I'll have money is if I had it in the bank. This is a real value - a real benefit.

Yakk wrote:Why should firkins be different than dollar bills wealth-wise?

Because I can't pay my taxes in firkins. And even if I could, the accounting would be a nightmare. Change firkins to pigs to see what I mean.

We have already established that there is someone willing to trade your firkins for dollars. So you can pay your taxes in dollars by trading the firkins away.

What remains is the difficulty of dealing with pricing firkins.

Yakk wrote:Third, bankruptcy usually exists.

"Are there no orphanages?"

I'm serious; going bankrupt because you speculated that the price of firkins would continue to increase and didn't divest when their value skyrocketed can happen.

Interesting, but it seems to value the firkins as if they were always worth the sale price, which seems quite unfair. Suppose they soared in value only in the last year; it becomes important that I did (or didn't) sell them and re-buy them the year before.

Yes: and that does result in people wanting to constantly clear the taxes on their firkins by doing a trivial round-trip transaction (or, just paying taxes on the current value).

Plus, taxes deferred is taxes denighed. Deferred taxes leave the possibility of carrying the deferrment around. And it also generates huge motivation to *lobby* to avoid paying those taxes.

A continuous tax of X per year requires you to know you'll be paying it in the future for you to lobby against its cost over years.

A deferred tax of X per year generates a known liability that you have increasing incentive to bribe politicians (I mean, make campaign contributions and set up think tanks) to "twerk the rules" to get your money out without paying the tax.

Deferred taxes too easily lead to loopholes and perverse incentives.

Hence I think we must tax things as close to immediately as possible.

One of the painful things about our time is that those who feel certainty are stupid, and those with any imagination and understanding are filled with doubt and indecision - BR

Yakk wrote:We have already established that there is someone willing to trade your firkins for dollars. So you can pay your taxes in dollars by trading the firkins away.

You asked why firkins are different from dollars. This is why. The mere fact that tax must be paid in dollars makes firkins fundamentally different. It's arguably the source of the value of dollars in the first place.

Yakk wrote:I'm serious; going bankrupt because you speculated that the price of firkins would continue to increase and didn't divest when their value skyrocketed can happen.

But that's not why I went bankrupt. I went bankrupt because of the way firkins were taxed. Similarly I can't give half a pig to the government (or sell it to pay the tax in dollars), and I can't sell half a pig and still have the other half-pig be functional. But I wouldn't have to do it if I weren't taxed on the mere existence of the pig, or the firkin. And how do you handle intangibles like the value of a brandname?

Yakk wrote:Yes: and that does result in people wanting to constantly clear the taxes on their firkins by doing a trivial round-trip transaction (or, just paying taxes on the current value).

No, because it could go the other way. Firkins could skyrocket in the first year; in that case holding them is better tax wise. There is no ungamable tax system, and this one is no better than any other. It's just different in that we haven't figured out all the games.

And wealth taxation isn't unlobbyable either. 'tis no magic bullet, and I'm not convinced it's better than income taxation. And it completely overlooks where the real power lies: influence (for which money is merely a tool). If you can figure out how to tax influence, we might be onto something. But there's an oxymoron there.

Jose

Order of the Sillies, Honoris Causam - bestowed by charlie_grumbles on NP 859 * OTTscar winner: Wordsmith - bestowed by yappobiscuts and the OTT on NP 1832 * Ecclesiastical Calendar of the Order of the Holy Contradiction * Please help addams if you can. She needs all of us.